Human Rights for WorkersThursday, April 22, 2010 Why have American companies shifted most of their production for the American market to China? And why do they continue to do so?

The overriding reason is the huge advantage they gain from China’s absolute control of Chinese workers, not from China’s rigid control of its currency. That truth is worth revisiting in light to the exaggerated hope being placed in the benefits that the U.S. would gain if Beijing abandoned its currency manipulation.

The issue came to the fore on business pages last month because the Obama administration decided to postpone the scheduled April 15 announcement to declare the People’s Republic a currency manipulator. In a teleconferenced briefing for some 65 activists, the Citizens Trade Campaign labeled China’s exchange rate policy as “the 800-pound dragon in the room.”

“Currency manipulation is just one of Chinese governments many unfair trade advantages, but it also the largest one,” the Citizens Trade Campaign (CTC) said in summarizing the teleconference.

That understates the plight of China’s working men and women. The iron fist of the country’s neo-Communist rule deprives them of all rights and makes them vulnerable to a wide range of exploitation, individually and collectively. Ironically, they are deprived of freedoms enjoyed by American business people in China.

It is an arrangement so obviously discriminatory, so immoral, that it should not survive one day longer. However, American business, to its eternal shame, will try to hold on it as long as possible, given the support of the U.S. government through its unfree trade and other policies.

Even some insiders now understand the folly of these policies. Robert B. Cassidy, a former Assistant Trade Representative, recently wrote:

“I now understand why so many of the trade agreements we negotiated never delivered the promises that were made and, if continued, never will.”

WASHINGTON—A bipartisan group of U.S. senators on Tuesday introduced legislation aimed at forcing the Obama administration to take action against China over its currency policy, reflecting growing anger on Capitol Hill over the issue.

Charles Schumer

The bill, which would require the U.S. to impose tariffs and other penalties on countries that failed to address misaligned currencies, is the latest action by lawmakers targeting the yuan, which many feel is undervalued against the dollar. Critics say Beijing has kept its currency artificially low to make its exports cheaper, giving them an advantage in the global market.

On Monday, the House Ways and Means Committee announced a hearing on China's currency policy for March 24.

More than 130 congressmen from both parties signed a letter urging Treasury Secretary Timothy Geithner and Commerce Secretary Gary Locke to take action on the issue.

Prospects for the Senate bill, versions of which have been introduced almost every year since 2005, remain unclear. Senate Majority Leader Harry Reid (D., Nev.) said it would be appropriate for the chairmen of the banking and finance committees to consider the issue. Sen. Max Baucus (D., Mont.), the finance panel chairman, said he was committed to working with the administration and Congress to "ensure we keep China accountable and keep American businesses competitive."

"We too have serious concerns about China's exchange- rate policy," the official said. "The rebound of China's economic growth and exports and their continued large-scale [foreign-exchange] reserve accumulation indicate clearly that China should resume appreciation" of the yuan.

China has, in response, accused the U.S. of trying to weaken the dollar to increase its exports. Last weekend, Chinese Premier Wen Jiabao denied that the government was exerting downward pressure on the yuan.

Lindsey Graham

Treasury must decide by April 15 whether to label China a currency manipulator in its biannual report to Congress on the currency policies of its trading partners. Such a designation wouldn't result in the imposition of any penalties on the offending country, but could further irritate already tense U.S.-China relations and goad Congress to take action.

Although the administration last year declined to label China a manipulator and Congress didn't pass any measures addressing the issue, some lawmakers and industry executives said there was more momentum for Congress to take action this year. With midterm elections in November, lawmakers are under pressure to address voters' discontent with the country's continued high unemployment rate.

Currently, the administration has discretion on how to respond to countries seen to be engaging in currency manipulation. The Senate bill would apply an "objective test" that would force the administration to take increasingly tough action if a country failed to address the problem. These include lodging a complaint with the World Trade Organization, blocking the award of any federal contracts to the offending country's companies, and applying countervailing duties.

Pressure is on for Administration's Trade Foray to Deliver the New American Trade Policy Obama Promised, not Continue Bush's NAFTA-With-Vietnam Model for TPP

The policy and political stakes are high as administration officials today begin negotiations for President Barack Obama's first potential trade agreement - the eight-nation Trans-Pacific Partnership (TPP). Negotiations will be held March 15-19 in Melbourne, Australia, with three additional rounds of negotiations scheduled for 2010, including a June session to be held in the United States.

The TPP negotiations are being closely watched because they have become the venue in which the Obama approach to trade pacts will be revealed. Broadly at issue is whether the new administration will use the TPP process to translate Obama's many specific campaign trade reform commitments into a new approach - or whether the administration will fall back on the trade agreement model used by the previous Bush, Clinton and Bush administrations. TPP talks were initiated by the Bush administration, which engaged in three rounds in 2008. A majority of House Democrats, including 12 full committee chairs and 58 subcommittee chairs (http://www.citizen.org/documents/TRADEAct-AllCosponsors.pdf), have made clear their expectations for any future trade pacts by sponsoring the Trade Reform Accountability Development and Employment (TRADE) Act. The legislation translates Obama's trade reform commitments into a new model for American trade pacts that are designed to achieve trade expansion under terms more consistent with Democrats' core policy goals of job creation, consumer safeguards and environmental protection.

Limited Prospects for Increased Exports?

Policywise, a key question is how the TPP talks connect to Obama's trade policy goal of doubling exports - and the linked goal of creating 2 million jobs. The U.S. already has free trade agreements (FTA) that zero out tariffs and maximize access for U.S. exports with the four countries (Australia, Singapore, Chile and Peru) that comprise more than 85 percent of the combined 1.6 trillion GDP of countries involved in TPP talks. Some in Congress have inquired why TPP talks are the best use of the limited resources of the Office of the U.S. Trade Representative (USTR) (http://cms.citizen.org/documents/Letterfromsenatorstokirk.pdf; http://cms.citizen.org/documents/TPPFTALettertoKirk.1-2010.pdf). USTR hopes other countries would join the any TPP pact that results. However this would require such a TPP agreement to contain significantly altered terms relative to past U.S. FTAs; past attempts to directly negotiate pacts with Malaysia and Thailand and approaches to Indonesia failed over objections in those nations to NAFTA-style investment, intellectual property and procurement terms.

And what is the prospect for U.S. job creation from zeroing out tariffs with the other three remaining TPP nations (Vietnam, Brunei and New Zealand)? On the export demand side, Vietnam's GDP is $91 billion with a per capita annual income of $1,024; while on the import side, Vietnam is increasingly becoming a lower-wage-than-China export platform for multinational firms' production. The population of Brunei is 388,000 - half that of Milwaukee - with a GDP of $11.5 billion. The population of New Zealand is 4,359,000 - half that of New York City - with a GDP of $112 billion, which equates to the GDP of Utah or less than half of Maryland.

Vietnam and Brunei Labor and Human Rights Problems

Moreover, two prospective TPP countries - Vietnam and Brunei - are undemocratic and have serious human and labor rights problems - a point noted by Ways and Means Committee Democrats, among others. The State Department's 2009 Report on Human Rights Practices noted that workers in Vietnam are prohibited from joining or forming any union that is not controlled by the government. On political freedoms, the State Department reported that "[t]he government [of Vietnam] continued to crack down on dissent, arresting political activists and causing several dissidents to flee the country." In Brunei, there is virtually "no trade union activity in the country and there is no legal basis for either collective bargaining or strikes," according to the International Trade Union Confederation. Some observers have suggested that the TPP must include a democracy clause that would require parties to have democratic forms of government. The imperative for effective labor standards in any Obama trade pact will be complicated not only by Vietnam and Brunei's inclusion in the talks, but by the reality that Singapore's leaders and Chile's new conservative government may not be willing to improve on the lax labor provisions in their existing U.S. FTAs.

TPP "Spaghetti Bowl" of 11 Existing FTAS With Different Terms

The first issue the Obama team will face in TPP talks is what form a possible TPP would take. The context of the TPP is that the United States, Australia, Vietnam and Peru are seeking to join negotiations on the expansion of an existing 2006 pact between Singapore, New Zealand, Chile and Brunei called the P-4. However, the existing P-4 text is a NAFTA-style pact, minus even NAFTA's unenforceable labor and environmental terms, that does not reflect Obama's campaign commitments to trade reform[1] or the position of many congressional Democrats. Thus, many congressional Democrats and base groups are calling for TPP talks to begin with a clean slate - creating a new agreement that would replace the P-4. The USTR has stated that this is its intention. However, there are 11 other trade agreements between the various proposed TPP partners - a "spaghetti bowl" of differing rules - that include various provisions to which various countries are wed. For instance, extremely controversial immigration provisions in the existing agreements with Chile and Singapore provided new "FTA visas" (5,400 per year from Singapore and 1,400 for Chile) that Congress insisted never be replicated in future pacts. The Australia FTA does not include the controversial investor-state enforcement system that allows private investors and firms to directly demand compensation from governments in foreign tribunals over domestic regulations they believe undermine their FTA investor rights.

Agreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP)

November 14, 2000

January 1, 2001

Peru-Singapore Free Trade Agreement (PeSFTA)

May 29, 2008

August 1, 2009

Peru-Chile Free Trade Agreement

August 22, 2006

March 1, 2009

Plus, the P-4 was envisioned as a "docking agreement" that other countries could join after the agreement went into force. Might the TPP be structured similarly? And, if so, what would be Congress' future role in approving countries seeking TPP accession?

Continuing Bush's TPP Approach? Or A New Model?

The United States has FTAs with four of the prospective TPP countries - Australia, Chile, Peru and Singapore - that have varying terms. Only the Peru FTA includes certain initial reforms to labor, environmental and access-to-medicine patent rules made in 2007 after a deal with then-President Bush and some congressional Democrats. Yet a majority of Democrats opposed the Peru FTA because its labor provisions explicitly forbade reference to the International Labor Organization's (ILO) Conventions and it still contained NAFTA-style investment, procurement and other terms. The U.S.-Australia FTA is alone among the four in not having private investor-state enforcement, a reform that many congressional Democrats have demanded of all trade agreements. Yet, all four pacts contain the substantive foreign investor terms that many congressional Democrats have opposed. The TRADE Act provisions laying out what American trade pacts must and must not include provide a guide for negotiating any prospective TPP that could obtain wide support. Congressional Democrats and their constituents have been clear in their demand for a new trade model that it must build upon past trade pact improvements. That is to say it must build upon the labor and environmental standards reforms and access-to-medicines patent rules improvements included in the text of the Peru FTA. In addition to extending to other countries the Australia FTA's standard of not including private investor-state enforcement of foreign investor privileges, a prospective TPP pact must provide for substantive reforms to investment rules - and deal with the procurement, service sector regulation, import safety and other issues that have been the basis for Democrats past opposition to NAFTA-style pacts.

Politically, A New Model Is Needed To Rebuild Democratic Support

At issue for an administration that promotes bipartisanship is whether the administration can formulate a new trade pact model that can garner support from congressional Democrats and key environmental, labor, family farm and consumer constituencies. The need to break from the past is made more pointed because TPP talks were initiated by the George W. Bush administration, which engaged in three rounds of negotiations in 2008. The bipartisan consensus marking decades of U.S. trade agreement votes was shattered with the 1990s advent of the NAFTA model of trade pacts. The NAFTA model newly included foreign investor rights that promote offshoring of production, caps on import safety and inspection standards, limits on domestic procurement policies and mandates for the deregulation of financial and other services. Since then, trade pacts have been passed by overwhelming GOP majorities and an increasingly limited number of Democratic votes - an approach that has serious negative political and policy ramifications that the Obama administration seems keen to avoid.

TPP Cannot Be A NAFTA With Vietnam

That polling results show bipartisan opposition to the current trade regime is not surprising, given since NAFTA and the World Trade Organization went into effect the U.S. has lost net five million manufacturing jobs (one of four in that sector), median wages have remained flat despite productivity gains, and unsafe food and product imports have flooded the U.S. market as the trade deficit has exploded. Senior White House officials quashed 2009 efforts by the USTR to push through Congress several trade pacts left over from the Bush era that are based on the NAFTA model. Democrats in Congress have worked to formulate a new trade pact model, presented in the TRADE ACT now sponsored by a majority of House Democrats, including most full committee chairs. That the Bush administration initiated the TPP talks creates a special imperative for the Obama administration to create a new approach to the TPP, in cooperation with Congress and interested Democratic constituencies.

Background and Timeline: TPP and U.S. Participation

Shortly after the passage of NAFTA in 1993, the Clinton administration launched initiatives to establish NAFTA-style "free trade" blocs that would encompass the Western Hemisphere and the Asian-Pacific region. Negotiations for an Asian Pacific regional FTA were proposed at the Asian Pacific Economic Cooperation (APEC) summit in Bogor, Indonesia, in 1994. However, the plans for both the Free Trade Area of the Americas (FTAA) and the APEC FTA unraveled, as major countries in each region came to loggerheads over the agreements' scopes and the model on which the pacts should be premised. With respect to APEC, this included Japan, Malaysia, Indonesia and others.

In late 2000, three of the APEC countries (Singapore, New Zealand and Chile) that were interested in pursuing the APEC concept of a regional Asian-Pacific FTA launched talks to establish what was formally called the Trans-Pacific Strategic Economic Partnership Agreement, or the Pacific-3 (P-3). Brunei later joined the P-3 talks. In 2006, an FTA, sometimes called the P-4 but formally named the Trans-Pacific Strategic Economic Partnership Agreement took effect. Its text was similar to NAFTA except it did not even include labor and environmental side pacts and did not include chapters on financial services and investment.

The U.S. Joins, and P-4 becomes TPP under Bush in 2008: Built into the P-4 text was an agreement to restart talks started in 2008 on financial services and investment issues. The Bush administration entered these talks and participated in three rounds of negotiations.[2] In September 2008, the Bush administration notified Congress that it would expand its participation beyond the two sectoral issues and start negotiations to become a full member of the agreement, which was identified as the Trans-Pacific Partnership.[3] The Bush USTR sent a second TPP notice to Congress in December 2008, expanding the list of partners to include Australia, Vietnam, and Peru.[4]

Obama administration and TPP: On Jan. 26, 2009, shortly after Obama's inauguration, the USTR published in the Federal Register a "Notice of intent to initiate negotiations on a Trans-Pacific Partnership (TPP) free trade agreement with Singapore, Chile, New Zealand, Brunei Darussalam, Australia, Peru and Vietnam, request for comments, and notice of public hearing."[5] Shortly thereafter, on Feb. 24, the Obama administration asked the TPP negotiating parties to delay indefinitely the negotiations that were scheduled for March 30, so that the new administration could appoint officials to the USTR and then review its trade policy.[6] On May 18, following a speech at the U.S. Chamber of Commerce, USTR Ron Kirk told reporters that, at a minimum, the USTR would pursue a TPP agreement in the Obama administration.[7] After Kirk's comment, however, the Office of the USTR made it clear that no decision had formally been made and the White House offered "no comment" to reporters regarding the matter.[8] On Nov. 14, Obama announced during a speech in Japan: "The United States will also be engaging with the Trans-Pacific Partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement."[9] On Dec. 14, Kirk sent letters to House Speaker Nancy Pelosi and Senate President Pro Tempore Robert Byrd notifying them of plans to initiate negotiations to form a TPP.[10]

ENDNOTES

[1] Public Citizen, "Selected Campaign Statements by President Barack Obama on U.S. Trade and Globalization Policy," 2008, Available at: http://www.citizen.org/documents/ObamaTradeCampaignStatementsFINAL.pdf

[2] Office of the USTR, "United States to Negotiate Participation in Trans-Pacific Strategic Economic Partnership," Fact Sheet. September 2008, Available at: http://ustraderep.gov/assets/World_Regions/Southeast_Asia_Pacific/Trans-Pacific_Partnership_Agreement/Fact_Sheets/asset_upload_file602_15133.pdf

[3] "Letter from Susan C. Schwab to the Hon. Nancy Pelosi, Speaker, U.S. House of Reps.," Sept. 22, 2008, Available at:

Two U.S. congressmen, Timothy Ryan and Mike Michaud, sent a letter Monday that was signed by a 130 of their colleagues to Treasury Secretary Tim Geithner and Commerce Secretary Gary Locke urging them to immediately address the growing problems associated with China's continued currency manipulation.

We write to express our serious concerns about China's continued manipulation of its currency. By pegging the renminbi (RMB) to the U.S. dollar at a fixed exchange rate, China unfairly subsidizes its exports and disadvantages foreign imports. As we work to promote a robust U.S. economic recovery, it is imperative that we address this paramount trade issue with all available resources. We urge your agencies to respond to China's currency manipulation with the actions outlined in this letter. Doing so will allow American companies and workers to compete fairly against their Chinese counterparts and will boost U.S. economic recovery and growth.

The impact of China's currency manipulation on the U.S. economy cannot be overstated. Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors. U.S. exports to the country cannot compete with the low-priced Chinese equivalents, and domestic American producers are similarly disadvantaged in the face of subsidized Chinese imports. The devaluation of the RMB also exacerbates the already severe U.S-China trade deficit. Statistics show that between January 2000 and May 2009, China's share of the U.S. trade deficit for non-oil goods grew from 26% to 83% -- an untenable pattern for American manufacturers. And finally, China's exchange-rate misalignment threatens the stability of the global financial system by contributing to rampant Chinese inflation and accumulation of foreign reserves. For these compelling reasons, we ask your agencies to pursue the course of action below.

First, we urge the Department of Commerce to apply the U.S. countervailing duty law in defense of American companies who have suffered as a result of the currency manipulation. The U.S. is permitted to respond to subsidized imports where the elements of a subsidy are met under the countervailing duty law. The countervailing duty law outlines a three-part test to identify the presence of a countervailable subsidy: 1) that it involves a financial contribution from the government; 2) that it confers a benefit; and 3) that is specific to an industry or a group of industries. China's exchange rate misalignment meets all three parts of this test and therefore merits the WTO-permitted application of countervailing duties.

Second, we ask the Department of Treasury to include China in its bi-annual agency report on currency manipulation. Since 1994 Treasury has not identified China as a country that manipulates its currency under the terms of the Omnibus Trade and Competitiveness Act of 1988 ("Trade Act of 1988"), but Secretary's Geithner testimony to the Senate acknowledging that fact surely justifies the inclusion of China in the report. After labeling the country as a currency manipulator, Treasury should enter into negotiations with China regarding its foreign exchange regime. These combined actions will signal the government's willingness to take decisive action against China's currency manipulation, including the potential filing of a formal complaint with the World Trade Organization.

The recommendations identified above must be done in concert with intense diplomatic efforts, not only with China but also with the IMF and multi-laterally with other countries. Through a combined strategy of legal action and international pressure, it is possible China will revisit its undervaluation of the RMB. If these efforts are not successful, we ask the Administration to consider all the tools at its disposal, including the application of a tariff on Chinese imports, to respond to China's currency manipulation. The economic impact of the RMB undervaluation on American businesses and workers is too great for the Administration not to pursue a comprehensive effort.

This economic downturn has underscored the pressing need to promote policies that protect U.S. jobs and U.S. businesses. Addressing China's manipulation of its currency must be a critical part of our strategy to rebuild our economy and establish safeguards against future financial crises. The Administration has the legal ability and resources to protect American businesses in the face of China's RMB devaluation, and we urge you to exercise this authority expeditiously.

Thank you for your consideration of this letter. We look forward to your response.

March 15 (Bloomberg) -- Brazil will seek to break intellectual property rights on U.S.-made prescription drugs, music, books, software and movies in a bid to force the U.S. government to end cotton subsidies that violate global trade rules.

Brazil’s government submitted a list of products that may have royalties, copyrights and patents suspended as part of $829 million in retaliatory sanctions authorized by the World Trade Organization, according to a statement published today in the country’s official gazette.

The Geneva-based WTO in August ruled that Brazil may impose annual sanctions on U.S. imports because the cotton subsidies violate trade regulations. Of the amount awarded, Brazil will adopt penalties on intellectual property rights totaling $239 million this year.

Brazil and U.S. still have room to negotiate an agreement to avoid the application of the sanctions, Foreign Minister Celso Amorim said last week. President Lula Inacio Lula da Silva blamed the “fighting” over the agricultural subsidies on the U.S.’s refusal to sign an accord during the Doha round of global trade talks.

“We want to show the U.S. that it doesn’t matter if you are big or small, or how much money you have as a nation,” Lula said on March 10. “We all want to be respected and to be treated fairly.”

No “concrete offer” was made by U.S. trade officials during meetings with their Brazilian counterpart, Cosendey said. The U.S. government asked for more time before engaging in talks as coordination with the Congress is needed on agricultural subsidies, Cosendey said.

If Brazil carries out its threat to infringe on intellectual property rights it will be the first country to cross-retaliate for practices that hurt trade of goods, Cosendey said.

The list of sanctions published today will be open to public consultation for 20 days before taking effect, according to the statement. Patents on veterinary and biotechnology products will also be affected by the measures announced today.

In addition to breaking intellectual property rights, Brazil will impose higher tariffs worth $591 million on 102 U.S.-made goods, including ketchup, wheat, chewing gum, cars and boats, according to a list published last week.

To contact the reporter on this story: Iuri Dantas in Brasilia Newsroom at idantas@bloomberg.net

With the Doha Round of negotiations of the World Trade Organization in limbo, the heavy hitters of international trade have been engaged in a race to sew up trade agreements with smaller partners. China has been among the most aggressive in this game, a fact underlined on January 1, 2010, when the China-ASEAN Free Trade Area (CAFTA) went into effect.

Touted as the world's biggest Free Trade Area, CAFTA will bring together 1.7 million consumers with a combined gross domestic product of $5.9 trillion and total trade of $1.3 trillion. Under the agreement, trade between China and Brunei, Indonesia, Malaysia, the Philippines, Thailand, and Singapore has become duty-free for more than seven thousand products. By 2015, the newer members of the Association of Southeast Asian Nations (ASEAN) — Vietnam, Laos, Cambodia, and Myanmar — will join the zero-tariff arrangement.

The propaganda mills, especially in Beijing, have been trumpeting the FTA as bringing "mutual benefits" to China and ASEAN. In contrast, there has been an absence of triumphal rhetoric from ASEAN. In 2002, the year the agreement was signed, Philippine President Gloria Macapagal-Arroyo hailed the emergence of a "formidable regional grouping" that would rival the United States and the European Union.
ASEAN's leaders, it seems, have probably begun to realize the consequences of what they agreed to: that in this FTA, most of the advantages will probably flow to China.

At first glance, it seems like the China-ASEAN relationship has been positive. After all, demand from a Chinese economy growing at a breakneck pace was a key factor in the Southeast Asian growth that began around 2003 after the low growth following the Asian financial crisis of 1997 and 1998. For Asia as a whole, in 2003 and the beginning of 2004, "China was a major engine of growth for most of the economies in the region," according to a UN report. "The country's imports accelerated even more than its exports, with a large proportion of them coming from the rest of Asia." During the current international recession ASEAN governments, much like the United States, are counting on China — which registered an annualized growth rate of 10.7 percent in the last quarter of 2010 — to pull them out of the doldrums.

A More Complex Picture

But is the Chinese locomotive really pulling the rest of East Asia along with it, on the fast track to economic nirvana? In fact, China's growth has in part taken place at Southeast Asia's expense. Low wages have encouraged local and foreign manufacturers to phase out their operations in relatively high-wage Southeast Asia and move them to China. China's devaluation of the yuan in 1994 had the effect of diverting some foreign direct investment away from Southeast Asia. The trend of ASEAN losing ground to China accelerated after the financial crisis of 1997. In 2000, foreign direct investment in ASEAN shrank to 10 percent of all foreign direct investment in developing Asia, down from 30 percent in the mid-nineties.

The decline continued in the rest of the decade, with the UN World Investment Report attributing the trend partly to "increased competition from China." Since the Japanese have been the most dynamic foreign investors in the region, much apprehension in the ASEAN capitals greeted a Japanese government survey that revealed that 57 percent of Japanese manufacturing transnational corporations found China to be more attractive than the ASEAN-4 (Thailand, Malaysia, Indonesia, and the Philippines).

Snags in a Trade Relationship

Trade has been another and perhaps greater area of concern. Massive smuggling of goods from China has disrupted practically all ASEAN economies. For instance, with some 70-80 percent of shoe shops in Vietnam selling smuggled Chinese shoes, the Vietnamese shoe industry has suffered badly. In the case of the Philippines, a recent paper by Joseph Francia and Errol Ramos of the Free Trade Alliance claims that the local shoe industry has also been hit hard by smuggling of Chinese goods. Indeed, the range of goods negatively affected is broad, including steel, paper, cement, petrochemicals, plastics, and ceramic tiles. "Many Philippine companies, even those that are competitive globally, had to close shop or reduce production and employment, due to smuggling," they write.

Because of this massive smuggling, the official trade figures with China released by the Chinese embassy in Manila — that show the Philippines enjoying a positive trade balance in manufacturing and industrial commodities — are questionable.

CAFTA may simply legalize all this smuggling and worsen the already negative effects of Chinese imports on ASEAN industry.

The Thai "Early Harvest" Debacle

When it comes to agriculture, the trends are clearer. Even without the FTA, for instance, the Philippines already has a $370 million deficit with China. I recently visited Benguet, a key vegetable and fruit producing area of the country. The farmers were despondent, almost resigned to being destroyed by the expected deluge of Chinese goods. A national government official warned them that their only chance of survival lay in invoking trade restrictions, based on complaints that Chinese imports did not meet sanitary standards — a risky move that could invoke retaliatory measures. The governor of the province complained that the CAFTA sneaked up on them, with most farmers not knowing that the Philippines signed the agreement as far back as 2002.

Similar bitter complaints have emerged in Thailand, where the impact of the "early harvest" agreement with China under CAFTA has been better documented.

Under the agreement, Thailand and China agreed to eliminate immediately tariffs on more than 200 items of vegetables and fruits. Thailand would export tropical fruits to China, while winter fruits from China would be eligible for the zero-tariff deal. The expectations of mutual benefit evaporated after a few months, however. Thailand got the bad end of the deal. As one assessment put it, "despite the limited scope of the Thailand-China early harvest agreement, it has had an appreciable impact in the sectors covered. The 'appreciable impact' has been to wipe out northern Thai producers of garlic and red onions and to cripple the sale of temperate fruit and vegetables from the Royal projects." Thai newspapers pointed to officials in Southern China refusing to bring down tariffs as stipulated in the agreement, while the Thai government brought down the barriers to Chinese products.

Resentment at the results of the China-Thai early harvest agreement among Thai fruit and vegetable growers contributed to widespread disillusionment with the broader free-trade agenda of the Thaksin government. Opposition to free trade was a prominent feature of the popular mobilizations that culminated in a military coup that ousted that regime in September 2006.

The Thai early harvest experience created consternation not just in Thailand but throughout Southeast Asia. It stoked fears of ASEAN becoming a dumping ground for China's extremely competitive industrial and agricultural sectors, which could drive down prices because of China's cheap urban labor and even cheaper labor coming to the cities the countryside. These fears at the grassroots have, however, fallen on deaf ears as ASEAN governments have been extremely reluctant to displease Beijing.

The Chinese View

For Chinese officials, the benefits to China of an FTA with ASEAN are clear. The aim of the strategy, according to Chinese economist Angang Hu, is to more fully integrate China into the global economy as the "center of the world's manufacturing industry." A central part of the plan was to open up ASEAN markets to Chinese manufactured products.
China views Southeast Asia, which absorbs only around 8 percent of China's exports, as an important market with tremendous potential to absorb even more goods, which is particularly important given the growing popularity of protectionist sentiments in the United States and European Union.

China's trade strategy is a "half open model," argues Hu: It's "open or free trade on the export side and protectionism on the import side."

ASEAN: a Beneficiary?

Despite the brave words from Arroyo and other ASEAN leaders in 2002, when the agreement was signed, it's much less clear how ASEAN will benefit from the ASEAN-China relationship. The benefits will certainly not come in labor-intensive manufacturing, where China enjoys an unbeatable edge because of its cheap labor. Nor would benefits come from high tech, since even the United States and Japan are scared of China's remarkable ability to move very quickly into high-tech industries even as it consolidates its edge in labor-intensive production.

ASEAN's agriculture ASEAN will also not be net beneficiary? As the early harvest experience with the Philippines and Thailand has shown, China is clearly super-competitive in a vast array of agricultural products from temperate crops to semi-tropical produce as well as in agricultural processing. Vietnam and Thailand might be able to hold their own in rice production, Indonesia and Vietnam in coffee, and the Philippines in coconut and coconut products, but there may not be many more products to add to the list.

Moreover, even if under CAFTA, ASEAN were to gain or retain competitiveness in some areas of manufacturing and trade, China will not likely depart from what Hu calls its "half open" model of international trade. The Thai early harvest experience underlines the effectiveness of administrative obstacles that can act as non-tariff barriers in China.

In terms of raw materials, Indonesia and Malaysia have oil that is in scarce supply in China, Malaysia has rubber and tin, and the Philippines has palm oil and metals. China, however, is largely reproducing the old colonial division of labor, whereby it receives low-value-added natural resources and agricultural products and sends to the Southeast Asian economies high-value added manufactures.

With multilateral trade negotiations stuck at the WTO, the big trading countries have been engaged in a race to sew up trade agreements with weaker partners. China is turning out to be the most successful at this game, having managed to create the world's largest free-trade area. For China, the benefits are clear. For its Southeast Asian partners, the benefits are less clear. Indeed, with the likely erosion of local industry and agriculture, Southeast Asia will be paying a big price for a bad deal.

You are signed up to the CTC Field List, which provides trade reform advocates like you with timely organizing information. The list administrators prioritize postings based on current CTC field activities, the congressional agenda, and the likelihood of the information actually mobilizing people into real action.

This semi-private list is made up of dozens of people from legislative offices, non-profit organizations and CTC affiliated coalitions. These staff, activists and organizers use it to communicate field information, pass on useful news and analysis, and coordinate efforts to bring about real trade policy change. (It's called semi-private, because anything you can send to dozens of people can always be forwarded.)

The Citizens Trade Campaign (CTC) is a national coalition whose members include Americans for Democratic Action, Communications Workers of America, Friends of the Earth, IATP Action, International Association of Machinists, International Brotherhood of Boilermakers, International Brotherhood of Electrical Workers, International Brotherhood of Teamsters, International Union of Painters and Allied Trades, League of Rural Voters, National Farmers Union, National Family Farm Coalition, Public Citizen, UNITE-HERE, United Methodist Church General Board of Church and Society, United Steelworkers of America, United Students Against Sweatshops, as well as regional, state, and city-based coalitions, organizations, and individual activists throughout the United States.

U.S. Rep. Larry Kissell has joined 27 other Congressmen by signing on to a bipartisan piece of legislation that would withdraw the United States from the North American Free Trade Agreement.

The bill is called House Resolution 4759.

Kissell cited his own experience as a dislocated worker who transitioned from a 27-year career in a textile mill to teaching civics in Montgomery County after his plant became a victim of NAFTA.

“I have watched many of my friends and neighbors lose their jobs and their benefits to these unfair trade deals,” Kissell said. “I went to Congress to make a difference for working people, and I believe that repealing NAFTA is a start to reenergizing American manufacturing. We have to invest in American manufacturing to put our people back to work.”

President Bill Clinton signed NAFTA in 1993 with former Presidents Gerald Ford, Jimmy Carter and George H.W. Bush looking on and said “NAFTA means jobs, American jobs and good-paying American jobs.”

Kissell said NAFTA and other trade deals “have decimated American manufacturing,” resulting in a 29 percent decline nationwide in jobs in that sector since 1993, reducing 17 million jobs in 1993 to approximately 12 million in 2009.

Kissell also cited a $1.7 billion trade surplus with Mexico in 1993, which turned into a $75 billion deficit by 2007. To the north, Kissell said the U.S. trade deficit with Canada was $11 billion in 1993, and grew to $78 billion by 2008.

“While NAFTA and other trade deals were not designated to have such a negative impact on American manufacturing, the results are clear,” Kissell continued. “The American economy is suffering. It has discouraged investments in U.S. manufacturing facilities and continues to accelerate the erosion of the our industrial base.”

According to the North Carolina Employment Security Commission’s Labor Market Information Office, the state lost 44 percent, or about 358,000, of its manufacturing jobs from 1993 to 2009. Richmond County lost 58 percent of its manufacturing jobs during the same time period.

North Carolina’s textile industry shed 64 percent of its jobs.

Here in Richmond County and throughout the 8th District, which stretches from Fayetteville to Concord, the textiles industry which thrived throughout the 20th Century has, in Kissell’s words, “been decimated.”

Mike Railton, office manager for the Employment Security Commission in Rockingham, has worked with the ESC since 2000 in Charlotte, Wadesboro and Rockingham.

He explained a special federal designation has been set up for workers who have lost their jobs to foreign competition under the Trade Act Program, which qualifies them for longer periods of unemployment insurance benefits and assistance retraining to enter another career field.

“It’s been my experience with the commission that a large number of those who qualified for TAA come from the textile industry,” Railton said Monday. “The textile industry has also been affected by cutbacks in the auto industry. When they stopped manufacturing as many cars workers who made carpet, seat covers and other textile items for the auto industry were left with nothing to do.”

Here in Richmond County, he said two major textiles employers whose laid-off workers qualified for these benefits over the past several years were Sara Lee Hosiery and UCO Fabrics.

Richmond County Manager Rick Sago noted there is a two-fold effect of cheaper labor and less regulation in foreign countries that gives them an unfair advantage over the U.S. in competing for manufacturing investment.

“Richmond County, like most of the country, has experienced a drop in manufacturing employment since 1993,” Sago said. “Any change in trade agreements that will allow our companies to compete on an even playing field globally certainly has the potential to help. It is very difficult for our manufacturing employers to compete with the very low cost of labor and lesser regulation that is found in other less developed countries.”

In a column Saturday, Kissell quoted U.S. Rep. Gene Taylor, a Mississippi Democrat, who introduced the bill in saying, “Proponents have had more than enough time to make this work - it didn’t.”

He also discussed another bill he is sponsoring in an effort to reduce the U.S. trade deficit and energize the American manufacturing sector.

That bill is HR 3012.

“Specifically, the Trade Reform, Accountability, Development and Employment Act would renegotiate the three major free trade agreements and establish mandatory core standards to be included in future agreements to preserve and create American jobs,” Kissell wrote.

The bill to repeal NAFTA has gained support from both sides of the aisle since being introduced on the House floor March 4. It was referred to the House Ways and Means Committee on the same day, and no further legislative action has been taken.

Others from the North Carolina delegation in the House of Representatives who have signed on to co-sponsor HR 4759 include 6th District Democrat Mike McIntyre and 3rd District Republican Walter Jones

High profile Congressmen from other states who have signed on include Democrats U.S. Rep. Dennis Kucinich of Ohio and U.S. Rep. Bart Stupak of Michigan and Republican Congressman from Texas Ron Paul.

On multiple occasions during his 2008 presidential campaign, then Democratic-candidate Barrack Obama pledged to revisit trade deals like NAFTA, and renegotiate them to achieve better terms for America’s suffering manufacturing industry.

Staff Writer Philip D. Brown can be reached at (910) 997-3111 ext. 32, or by e-mail at pbrown@yourdailyjournal.com.

The China Trade Toll

Last week Scott published an op-ed in The Huffington Post where he addressed The Myth of the Manufacturing Recovery, and said that growing trade deficits were largely to blame for the six million U.S. manufacturing jobs that had been lost since 1998.

The China Trade Toll, a 2008 paper by international economist Robert Scott about the U.S. jobs that have been lost or displaced because of increased trade with China, continues to influence trade policy discussions. Last month, when President Obama discussed tougher enforcement of trade rules with Senate Democrats, Senator Arlen Specter cited the paper's findings that 2.3 million U.S. jobs had been lost or displaced between 2001 and 2007 as a result of a trade imbalance with China. Scott's paper also looks at how this trade imbalance has suppressed wages and finds that even when workers displaced by the growing trade deficit found new work, it was typically at a much lower salary, with an average annual loss of $8,146 per worker between 2001 and 2007.

SANTA BARBARA, Calif.—Energy Secretary Steven Chu said Friday that an effort by Democratic lawmakers to block federal stimulus grants for energy projects that use foreign-made hardware could cost U.S. jobs.

"There are unintended consequences by just coming out and saying, Buy American," Dr. Chu said. "I do not want a moratorium. We have 9-10% unemployment. You do not want to stop these projects if 2/3 [of the hardware] is American and 1/3 is foreign." In remarks on the sidelines of the conference, Dr. Chu said he will "work with people in Congress to explain the subtleties" of the global wind-energy market.

A group of Democratic senators earlier this week proposed legislation to block the Energy Department from using stimulus funds to subsidize wind-energy projects that use foreign-made turbines. One target is a proposed wind-energy project in Texas where the backers plan to use wind turbines made with Chinese components. The senators said in a statement that the clean-energy grant program has paid out more than $1 billion to foreign manufacturers.

"The point of the stimulus was to create jobs in America, and to turn down this opportunity to strengthen domestic manufacturing of wind turbines, solar panels and other clean-energy technology defies common sense," Sen. Charles Schumer's office said in a statement Friday.

Dr. Chu, during an appearance at The Wall Street Journal Eco:Nomics conference here, said congressional demands that the Energy Department not fund projects that use foreign-made technology could force a halt to projects that promise to create U.S. jobs.

The flareup over wind energy is the latest in a series of problems the administration has faced because of congressional efforts to mandate that stimulus funds go to purchase only U.S.-made goods. The Buy American demands have exacerbated trade frictions, and slowed down the progress of some stimulus projects.

On other issues, Dr. Chu defended the administration's decision to abandon a plan to construct a nuclear-waste repository at Yucca Mountain, Nev., and said the facility as planned would have run out of room in a couple of decades as more nuclear plants were built.

"Rather than wringing my hands…let's go forward and do something better," he said. The administration's decision has drawn fire from big utilities who are concerned that they could face constraints in developing new nuclear power plants if there is no long-term waste storage in the U.S. Dr. Chu expressed confidence the industry will ultimately support what he called " a fresh look" at the problem.

Dr. Chu also said he wants Congress to pass a strong bill to put a price on carbon this year, and said reducing greenhouse-gas emissions is "an economic opportunity" to develop clean-energy technology in the U.S.

"China is moving $9-10 billion a month...they want to be a leader in this new technology. It's ours to lose, but we could blow it," Dr. Chu said. He said U.S. businesses can adapt to higher energy prices by becoming more efficient and adopting new technology.

This is a radio broadcast about repealing NAFTA and the protectionist movement presently building in America.

The bill spearheaded by Rep. Gene Taylor, a Mississippi Democrat, would require President Barack Obama to give Mexico and Canada six months notice that the United States will no longer be part of the 16-year-old trade pact. "At a time when 10 to 12 percent of the American people are unemployed, I think Congress has an obligation to put people back to work,"
Taylor said. He argued NAFTA has cost the United States millions of manufacturing jobs and hurt national security by encouraging companies to move production to Mexico.The high unemployment rate makes it the "perfect" time to push for repeal even though past efforts have failed, he said.

"You'll see the American people rally behind this, in my humble opinion," said Rep. Walter Jones, a North Carolina Republican who is one of about 28 co-sponsors of the bill.

Business groups like the National Association of Manufacturers and the U.S. Chamber of Commerce strongly support NAFTA, which they say has spurred U.S. economic growth by tearing down trade barriers between the three countries.

The repeal proposal comes as Obama says he wants to resolve problems blocking congressional approval of long-delayed trade deals with South Korea, Panama and Colombia.

The strongest opposition to those agreements comes from Obama's fellow Democrats.

The United States also will begin talks later this month with Australia, New Zealand, Singapore, Chile, Peru, Vietnam and Brunei on an Asia-Pacific regional free-trade agreement.

Obama criticized NAFTA during the 2008 presidential election campaign but has not followed through on threats to withdraw from the agreement if Canada and Mexico did not agree to revamp the pact's labor and environmental provisions.

But many Democrats are pushing for that and other changes to existing trade deals before considering any new deals such as the deals with South Korea, Colombia and Panama.

The House of Representatives is expected to vote later this year on whether the United States should remain a member of the World Trade Organization.

U.S. law allows House and Senate members to request a vote on that issue every five years. In 2005, 86 of the House's 435 members voted to withdraw from the world trade body.